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Friday, November 9, 2007

Meeting in the middle

I recently had a deal that didn’t go through, which happens more that any of us would like lately. I have a house listed at what I think is a fair price and a seller who is willing to negotiate a bit, but is still in that “I won’t give he place away’ mode. So, we get an offer and it is one of those low-ball offers that all too many buyer agents are talking their clients into making, just to see if they can steal the house from a desperate seller.

This offer had 6% of sellers concessions baked into it; in addition to a offer price that was 10% below asking price. I guess that’s to be expected in the market that we’re in; at least the 90% offer price. Even the request for seller’s concessions isn’t all that rare, although the 6% level is a bit unusual because most lenders set the limit at 3%. This was apparently tied into some first-time buyer program.

So, anyway, we went back and forth several times and never could agree upon a landing price that made both parties happy. That is also not unusual these days. One argument that I got from the other side was that they had made the effort to meet us “half-way” and were disappointed that we would reject their final offer. As I did the calculations, they increased their offer by 1/3 of the difference and dropped the requested concessions to 3%, which my client just didn’t see as meeting us half-way and neither did I. If the house had been overpriced to begin with, perhaps a portion of the low offer might have been viewed as dealing with the difference between the asking price and the market price.
I try fairly hard to make sure that my listings are priced to the market; but, occasionally I’ll have an overpriced listing in my inventory, especially in the early days of the listing. I don’t feel bad about where we are on this listing.

What I think has happened in the market is that almost all buyers and buyer agents have become conditioned by foreclosures and other distressed properties to think that all sellers are desperate and will take whatever is offered. That is starting to discourage some sellers, many of whom are pulling their houses off the market (at least those who can afford to do so). That’s too bad and results in further skewing the market, since the remaining sellers many time are desperate or in distress.

It will all work itself out over time; but, in the mean time, regular sellers have to put up with aggressive buyers and low-ball offers. As I said in my August 31 posting on Greed in Real Estate, the process needs to result in a win-win situation, where both sides of the deal feel good about the transaction. Truly meeting half way may allow that to happen, but you need to start from the right points on both sides.

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